Laxmi Capital News
New FinMin inherits a challenging economy

The governments formed during the politicaltransition had usually appointed non-economist finance ministers, who werelargely unaware about the economic situation of the country. Consequently, theyhad a tough time providing proper guidance to the state actors on numerouseconomic issues. To make the matters worse, the frequent change in thegovernment resulted in the government leadership appointing their ‘near anddear’ ones as finance minister for the benefit of the political party and tolaunch distributive programmes for populist competition. As a result, thecountry has had to suffer due to lack of proper economic policy interventions.

After RamSharan Mahat, who was the finance minister during the tenure of late SushilKoirala, three non-economist finance ministers — Bishnu Paudel, Krishna BahadurMahara and Gyanendra Bahadur Karki — were appointed in the interval oftwo-and-a-half years. Prior to that, Babu Ram Bhattarai-led government hadappointed Barsha Man Pun as the finance minister.

The Ministryof Finance has a pivotal role, as it is authorised to allocate resources andmobilise revenue. However, because of lack of a visionary and action-orientedleadership, the finance ministry has not been able to play an effective role interms of policy intervention in the recent years.

Against thisbackdrop, the government of KP Sharma Oli today appointed Yubraj Khatiwada asthe new finance minister.

Khatiwada, whohad earlier served as the vice chairman of National Planning Commission andgovernor of Nepal Rastra Bank, has been recognised as a ‘practical economist’and development planner, who has been involved in development planning andframing of economic policies since long. As the central bank governor, he iscredited for his contribution in consolidation of financial institutions andmaintaining discipline in the financial sector for its stability.

As per hisspecialisation, 62-year-old Khatiwada is monetary policy expert. However, hehas a long experience in development planning as he has served as a member andvice chairman of the apex planning body several times.

Many believethat Khatiwada is inflexible and action-oriented person in terms of executingpolicies for the betterment of the economy. In his public speeches, Khatiwadahas always spoken against speculations and middlemen. He has often expresseddissatisfaction at unnatural price rise of lands, which are ‘supposed to beused as means of production’.

As thegovernor of the central bank, he had also controlled margin lending to preventthe ‘unnatural growth’ of the stock market. Khatiwada has always been friendlytowards the production sector and strict towards speculators.

After beingappointed as the finance minister, Khatiwada urged his team at the financeministry to be patient in the face of a looming ‘crisis’. By ‘crisis’, thefinance minister was referring to the challenges in generation and efficientallocation of resources in the new administrative setup.

Khatiwada isin tight schedule to present the budget for next fiscal by the end of May, asper the provision of the Constitution and there are high expectations from thegovernment, which has made promises of economic prosperity to the people.

The governmenthas been raising domestic debt at the high interest rate to manage the expensesof federal government and also to ensure grant transfer to the local bodies.

Meanwhile,revenue mobilisation has been slow and is currently below the target. Growth oftax revenue is just 16 per cent. Also, the country has been facing balance ofpayment deficit along with retarded growth of remittances. On other hand,requirement of resources for setting up institutions at the lower layers ofadministration is high.

In the welcomeceremony, Finance Secretary Shankar Adhikari drew the attention of the newlyappointed finance minister on the need for efficient allocation, ruthlessactions to control the revenue leakages, along with  a conduciveenvironment to attract foreign and domestic investment in the productionsector.

Khatiwada alsounveiled his five-point guiding principles. He vowed to end the haphazardexpenses from the public purse and introduce efficiency in public financemanagement. Stating that boosting productivity and job creation are the toppriorities of the government, Khatiwada laid emphasis on utilising theavailable resources from the financial system to boost the productive sector.He urged the team of finance ministry to resolve the current challenges in theeconomy as ‘short-term’ problems.

He also urgedthe private and public investment to complement each other to spur economicgrowth and expressed commitment to make the Investment Board of Nepal moreactive to attract more investment into the country.

The financeminister also emphasised on the need of huge development assistance from theinternational community and multilateral development partners in the changedcontext. “The international assistance will be utilised to create coherence ontrade and investment, technology transfer and labour market relations,” hesaid.

Source:The Himalayan Times, 27th February 2018

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